Academic Statement
Management of Change in Tourism Family-Internal Succession in Tourism SMEs
Gerhard Pilz, BA 1010487014
Management Center Innsbruck MCI Tourism Weiherburggasse 8, 6020 Innsbruck AUSTRIA
MCI | ePortfolio | Family Business Management | Gerhard Pilz
2
Academic Statement: Management of Change in Tourism The Problem of Family Internal Succession in Family-Run Tourism SMEs The paper “Management of Change in Tourism – The Problem of Family Internal Succession in Family-Run Tourism SMEs” by Zehrer & Haslwanter (2010) discusses the issue of handing-over a family-run small- and medium sized enterprise (SME) to the next generation, which is also discussed by several other authors (Aronoff et al, 2010, Fager & McKinney 2007, Chua et al. 2003). The authors of the paper discern the problem of succession within family businesses from that in other small- and mediumsized enterprises (SMEs) as “interpersonal connections differentiate family from nonfamily businesses” and concentrate on the issue of family-internal succession in tourism businesses. The paper, by applying qualitative research in the form of expert interviews, answers three main research questions, which will be discussed in this statement.
Discussion The first question placed in the paper concerns the most important characteristics of successors in the course of taking-over the family business. The experts mainly came up with tourism-related traits and business-administration skills, which for them were important in order to successfully transfer the business to the next generation. Interestingly, only 2 out of 15 experts stated “leadership skills” as being an important trait of the successor. This is interesting as Hinterhuber (2011, p. 26) states that there is a necessity for balance between leadership and management in order to be a good entrepreneur. This is a fortiori true for SMEs, where in most cases leadership and management function cannot be separated into two jobs, but both are the responsibility of the owner-manager. Also, in a non-family business there are basically two systems a leader has to deal with, which are the business organization and dealing
MCI | ePortfolio | Family Business Management | Gerhard Pilz
3
with shareholders/owners, while within a family business there is one more component that is family, which is almost always interwoven with the other two systems (Aronoff & Baskin 2005, p.1.). This is also demonstrated by the 3-circle model by Tagiuri & Davis (1982). The second question asked the experts for the ideal time for family-internal succession. More than half of the experts vote in favour of a planned succession, while in general opinions differ about the point of time when the business should be handed-over. Zehrer & Haslwanter note that the experts’ point of view is opposed to the view that literature suggests. However, it is important to bear in mind that literature (Kürten 2006, p. 6, Pfannenschwarz 2006, pp. 18-19) and the paper itself propose the difficulty of assessing a model for family-businesses and their mode of operation. Thus, it is reasonable to say that it is as difficult to determine a model that applies to each and every succession of a family-owned business. The quantitative limitation of the study, as the authors note, also narrows the room for interpretation here. Here, it is important to note that although “the leader of a family business starts out with an automatic advantage in his or her efforts to build trust among the workforce” (Paisner 1999, p. 55) it is also important to consider the fact that nonfamily employees might want to be able to relate to the new leader. Therefore it is an advantage if they have an idea about how the person earned his or her way outside the family-business (Hess 2006, p. 48). Thus, it can be argued that although succession should take place as early as possible, the successor should also collect experience outside the family-business first. However, most important of all is a thorough plan for the succession, which according to Andrew Keyt (Executive Director of the Loyola University Chicago Family Business Center) involves 3 key factors: regular communication with the family, good advisors at hand, and regular strategic planning (Keyt 2009).
MCI | ePortfolio | Family Business Management | Gerhard Pilz
4
The third question asked for reasons why intra-family succession fails. Based on the interpretation of the experts’ answers the authors assume that “family conflicts might be problematic and hinder family internal succession� (Zehrer & Haslwanter, 2010) and note the non-falsifiability for their empirical study. In fact, the determination of the reasons for succession failure is a difficult task. Although conflicts within the family might play a role in unsuccessful hand-over, empirical evidence is missing that it is the only cause for the inefficacy of the succession. Also, literature in this field concentrates on the success factors rather than the reasons for failure (Tagiuri & Davis 1992, Astrachan & Kolenko 1994). Thus, it is of great interest for further studies on the topic to have a closer look on the issue of conflicts within the family in general, and in the course of succession in particular. An interesting aspect is the question if the conflicts arise between the senior generation and the successor(s) or only amongst potential successors.
Conclusion In conclusion, family-internal succession within tourism SMEs brings along 3 main challenges that have to be considered. First, the successor needs to be a leader and have various characteristics that are important for taking over and creating a successful future for the company. Second, it is important to plan the succession carefully and regularly communicate with the family and also non-family advisors. Third, conflicts within the family are a potential risk for a successful succession. Keeping these three issues in mind within family-internal succession will help to hand-over the company to the next generation successfully.
MCI | ePortfolio | Family Business Management | Gerhard Pilz
Sources & Literature: Aronoff, C. E., Ward, J. L. & McClure S. L. 2010, Family Business Succession: The Final Test of Greatness, 2nd ed. (revised), Palgrave Macmillan, New York, NY. Astrachan, J. H. & Kolenko, T. A. 1994, A Neglected Factor Explaining Family Business Success: Human Resource Practices, in: Astrachan, J. H., Pieper, T. M. & Jaskiewicz, P (eds.), Family Business, Edward Elgar Publishing Limited, Cheltenham. Aronoff, C. E. & Baskin, O. W. 2005, Effective Leadership in the Family Business, Family Business Leadership Series, No. 21, Family Enterprise Publishers, Marietta, GA. Chua, J. H., Chrisman, J. J. & Sharma, P. 2003, Succession and Nonsuccession Concerns of Family Firms and Agency Relationship with Nonfamily Managers, in: Astrachan, J. H., Pieper, T. M. & Jaskiewicz, P (eds.), Family Business, Edward Elgar Publishing Limited, Cheltenham. Fager & McKinney 2007, Succession Planning for the Family Owned Business: a blueprint for the future, Sub-Scribe Literary Services, Madison, WI. Hess, E. D. 2006, The Successful Family Business : a proactive plan for managing the family and the business, Praeger Publishers, Westport, CT. Hinteruber, H. 2010, Die 5 Gebote f端r exzellente F端hrung, Frankfurter Allgemeine Buch, Frankfurt am Main.
5
MCI | ePortfolio | Family Business Management | Gerhard Pilz
6
Keyt, A. 2009, Family Business Succession Planning, Interview, Wells Fargo Business, 26 May 2009, online, available at: http://www.youtube.com/watch?v=XJ2mAQnEHis [accessed 10 April 2011]. Kürten, N. 2006, Application of a Unique Model to Build Up Succession of Family Business in Practice, Scholay Paper, GRIN Verlag, Munich. Paisner, M. B. 1999, Sustaining the Family Business: an insider’s guide to managing across generations, Basic Books, Cambridge, MA. Pfannenschwarz, A. 2006, Nachfolge und Nicht-Nachfolge in Familienunternehmen, Band 2: Fallstudien zum familieninternen Generationswechsel, Verlag für Systemische Forschung im Carl-Auer-Systeme Verlag, Heidelberg Tagiuri, R. & Davis, J. A. 1982, Bivalent Attributes of the Family Firm, Working Paper, Havard Business School, Cambridge, MA. Reprinted 1996, Family Business Review IX (2), pp. 199-208. Tagiuri, R. & Davis, J. A. 1992, On The Goals of Successful Family Companies, in: Astrachan, J. H., Pieper, T. M. & Jaskiewicz, P (eds.), Family Business, Edward Elgar Publishing Limited, Cheltenham. Zehrer, A. & Haslwanter, J. 2010, Management of Change in Tourism – The Problem of Family Internal Succession in Family-Run Tourism SMEs, Electronic Journal of Family Business Studies (EJFBS), Issue 2, Volume 4, pp. 147-162.